Elon Musk’s Department of Government Efficiency recently gave us a notable example of deficient accounting-related record-keeping…

…and the Trump administration continues in its uniquely charmless way to provide material falling within the broad scope of this blog. You know how we’ve all believed, or claimed to believe, that financial and economic information is useful to decision-makers in making well-informed judgments, resource allocations and so on? Well, as the whole world knows, Trump and his cohorts recently relied on some fancy accounting (it even involved a “formula”) to upend global trade, announcing a bewildering array of country-specific tariffs. Journalist James Surowiecki was among the first to clarify the underlying “methodology”:

• Just figured out where these fake tariff rates come from. They didn’t actually calculate tariff rates + non-tariff barriers, as they say they did. Instead, for every country, they just took our trade deficit with that country and divided it by the country’s exports to us. So we have a $17.9 billion trade deficit with Indonesia. Its exports to us are $28 billion. $17.9/$28 = 64%, which Trump claims is the tariff rate Indonesia charges us. What extraordinary nonsense this is.

He amplified in subsequent posts:

• Even given that it’s Trump, I cannot believe they said “We’ll just divide the trade deficit by imports and tell people that’s the tariff rate.” And then they decided to set our tariffs by just cutting that totally made-up rate in half! This is so dumb and deceptive.
• it’s actually worse than I thought: in calculating the tariff rate, Trump’s people only used the trade deficit in goods. So even though we run a trade surplus in services with the world, those exports don’t count as far as Trump is concerned.

One could cite endless commentary and analysis on this, but let’s pick out one area of illustrative usefulness, the treatment of tiny Lesotho, as set out here by Binyamin Appelbaum:

• In 2023, Lesotho exported about $228 million worth of goods and services to the United States and imported just $7.33 million worth from the United States. To rectify this imbalance, which the Trump administration regards as an intolerable abuse of the American people, the president is imposing a 50 percent tax on future imports from Lesotho — the highest rate on any country.
• It is a decision that illustrates the stupidity and cruelty of Trump’s new trade policy even by comparison with its stated purpose.
• Lesotho is one of the poorest countries on Earth. Its 2.3 million citizens spend an average of only $3 on American goods and services each year not because they’re trying to cheat the United States but because they have very little money.
• And what of the stuff that Americans buy from Lesotho? Diamonds top the list. We could improve our trade balance with Lesotho by purchasing fewer diamonds, but we can’t mine our own. There are no commercial diamond mines in this country.

Choosing to put things mildly, CPA Canada commented: “The spillover effects of tariffs on Canadian businesses, of high uncertainty and slowing growth across the world will certainly mean economic stagnation and probably economic contraction for the end of 2025.” Such chaos certainly puts much of corporate accounting in grim perspective: as I noted, it might be hard for practitioners to argue for the importance of the more arcane aspects of financial statements when the ability to make informed long-term decisions is being so comprehensively corrupted. That same CPA Canada article observes: “U.S. President Donald Trump has made it abundantly clear that the intent of these tariffs is to bring back manufacturing into the United States,” and goes on: “The intent is understandable; it is important to have manufacturing capabilities. However, recent economic growth in high-income countries has not been driven by manufacturing. In fact, manufacturing as a percentage of GDP has been trending down. Implementing tariffs that impair global and industrial growth in the name of domestic manufacturing growth is costly and risky at best—and straight-up recessionary at worst.” To amplify that, how many US-based entrepreneurs will confidently invest money in building domestic manufacturing capabilities for items which will always be more cheaply manufactured overseas (all but 2% of clothing purchased in the US is made abroad, for example).

Writing about Trump’s first election in 2016, I opined “that the world is succumbing to irrationality and recklessness, regardless that its complexities and challenges have never required such collective focus and intelligence. There’s hardly an aspect of public discourse and policy-making that likely won’t be resultingly degraded over the next four years.” On that basis, I suggested, “making risk-appropriate capital allocation decisions with reference to any kind of long-term horizon will become more challenging than ever.” But I didn’t foresee the scale of the unraveling, let alone that nine years on, Trump-driven wretchedness would be escalating, rather than receding into the rear-view dregs of history…

The opinions expressed are solely those of the author.